Another weekend, another secret, and failed, meeting between the EU and Greece to find a bailout solution that simply does not exist. Reuters reports that while America was out camping, barbecuing and all around vacationing, the European Union was feverishly working on a second bailout package, holding another round of emergency talks with the Greek government, to prevent a June 29 default by Greece when money runs out. Alas, it is now too late: with austerity protests now a daily event, the political opposition has the upper hand and it seems that Greece's conservative opposition has demanded lower taxes as a condition for reaching a political consensus with the Socialist government on further austerity measures, a move which Brussels would not agree to, since unlike in America, cutting revenues does not lead to an reduction in the deficit, and anyone with a 2nd grader's education is aware of it. Punctuating that Europe's idealist unitary vision is about to be torn to shreds, even as the US and UK are out for the day, is the Greek 10-year Bund spread which rose by 20 basis points to 1,387 while two-year yields were up
58 bps to 26.23%.
More on the political barriers to a rescue package:
The tax cuts sought by conservative New Democracy leader Antonis Samaras could aggravate the revenue shortfall, but he argues they are essential to revive economic growth.
EU officials said a new 65 billion euro package could involve a mixture of collateralized loans from the EU and IMF, and additional revenue measures, with unprecedented intrusive external supervision of Greece's privatisation program. "It would require collateral for new loans and EU technical assistance -- EU involvement in the privatisation process," one senior EU official said, speaking on condition of anonymity.
Extra funding for Greece faces fierce political resistance from fiscal conservatives and nationalists in key north European creditor countries -- Germany, the Netherlands and Finland -- complicating EU governments' task.
More allegations of secret meetings, this time not from Spiegel but from Kathimerini:
Greek daily Kathimerini said finance ministers of the 17-nation single currency area may hold a special meeting next Monday on a new package. European Commission spokesman Amadeu Altafaj dismissed the report as "unfounded rumours, once again."
The next scheduled meeting of euro zone finance ministers is on June 20 in Luxembourg, having been pushed back a week from its original date. It will be followed three days later by a summit of EU leaders to assess the 18-month-long debt crisis.
And while a reprofiling, a SMILE, or however one wants to call the Greek bankruptcy is inevitable, the ECB continues to be staunchly against it, correctly pointing out that there is no such thing as a "controlled demolition."
ECB board member Lorenzo Bini Smaghi said in an interview published on Monday the idea that debt restructuring could be carried out in an orderly way was a "fairytale," saying it was the equivalent of the death penalty.
"If you look at financial markets, every time there is mention of a word like 'restructuring' or 'soft restructuring' they go crazy -- which proves that this could not happen in an orderly way, in this environment at least," Bini Smaghi told the Financial Times.
He also warned against a debt 'reprofiling', or voluntary extension of Greek bond maturities, saying it would be hard to get investors to agree to such a deal without the use of force.
Naturally, as reported yesterday, the best outcome to Europe, or rather Europe's bankers, would be for Greece to cede all sovereignty, and just become a vassal colony of Belgium:
"The Eurogroup is doing research for reprofiling -- what can you do on reprofiling? Is it possible without a credit event?" Dutch Finance Minister Jan Kees De Jager told reporters on Saturday in Cyprus. "It's an investigation, and we have to wait for the outcome of it.
EU officials contend that Greece could do much more to help itself by selling off a treasure trove of state assets.
ECB executive board member Juergen Stark told Welt am Sonntag newspaper that Athens could raise as much as 300 billion euros from privatising state property.
Greece currently aims to raise 50 billion euros from privatisations by 2015 to help stave off a fiscal meltdown, but the country lacks a proper land registry and ownership of many potentially lucrative assets is legally uncertain.
Athens is setting up a sovereign wealth fund to pool real estate assets and state stakes in companies such as telecom company OTE, Post Savings Bank and ports.
It is funny how everything will come to a head (enter IMF jokes) within a 24 hour span: the Greek IMF tranche is due June 29 (and as of right now we use the word "due" very loosely), while QE2 ends on June 30, which also happens to be the day the new IMF successor is expected to be chosen. Lots of distractions ahead: avoid the noise and focus on the signal.
And for all those to whom things are still unclear (even though Zero Hedge suggested the purchase of Greek, and all other sovereign, CDS back in January of 2009), here is a flowchart we presented in January of 2010, well before the "everybody could have seen this happening" stage, which explains everything that has transpired in (and with) Greece in the past 1.5 years. We are now in the "Insufficient Adjustment" stage. There are only two options as to what lies ahead (and only one open question: will the final E-Bay price for Santorini have the VAT included and can it be shipped via first overnight).